JOHANNESBURG (miningweekly.com) – Diversified miner BHP Billiton and the South African government are progressing in their discussions on the fiscal framework under which the drilling for oil offshore of South Africa's West Coast could proceed, new BHP Billiton Southern Africa chairperson Dr Xolani Mkhwanazi says.

BHP Billiton has had two oil exploration concessions off South Africa's West Coast, and has aspirations to drill an exploration well in deep-water exploration blocks situated 175 km northwest of Cape Town.

These are Blocks 3B and 4B, where BHP Billiton has conducted two-dimensional and three-dimensional assessments.

Blocks 3B/4B are said to cover an area of 21 630 km2, with water depths ranging from 300 m to 2 500 m.

The company is understood to have spent between $20-million and $30-million on its West Coast effort so far and has been negotiating and working with the various branches of the South African government for some time on exploration of the concessions.

BHP Billiton has been keen to carry out a West Coast drilling programme for some time, but has had to mark time while fiscal and regulatory certainty are attained.

Mkhwanazi, who assumed office on October 15 last year, tells Mining Weekly Online that the proposed project would be mutually beneficial.

"This has the potential to be good for both South Africa and for BHP Billiton, and will reaffirm our commitment to South Africa and the African continent, which we have always espoused," he says.

The company was seeking long-term stability for itself beyond the exploration phase.

"As we have said before, we do need a long-term financial regime that is consistent over time, and government needs us to provide a long-term guarantee of our investment so that it can also benefit from the taxes," he says.

"We are in ongoing talks and I think we are progressing although we still have some issues to resolve."

Mkhwanazi, who has taken over Dr Vincent Maphai, formerly headed BHP Billiton Aluminium as COO.

His responsibility would include leading the implementation of BHP Billiton South Africa's strategy, the company's transformation and sustainability agenda, and leading government engagement at all levels.

Mkhwanazi was also chairing BHP Billiton Energy Coal South Africa (Becsa) as well as the company's South African operations committee, which comprised the global presidents of the aluminium, coal and manganese business groups.

Becsa is currently investing $1,5-billion in two coal projects in Mpumalanga, the Douglas-Middelburg Optimisation project and the Klipspruit project, which are scheduled to begin production next year and the following year.